HM Revenue & Customs (HMRC) investigations into the UK’s largest companies are now taking an average of nearly three and a half years to resolve, according to new data.
The latest analysis reveals that HMRC's scrutiny of corporations with annual revenues above £200 million has lengthened in duration, with over 2,100 current investigations underway. This trend reflects the tax authority's intensified focus on closing the UK’s estimated £47 billion tax gap, but it also highlights the operational and financial pressures that prolonged enquiries impose on major businesses.
The issue is drawing increasing attention from policymakers and business leaders, as the efficiency and effectiveness of the UK’s tax compliance framework become matters of national economic significance.
Average duration of HMRC investigations increases
Research indicates that open tax investigations handled by HMRC’s Large Business Directorate now last an average of 41 months, equivalent to three years and five months. While this marks a modest improvement from last year’s average of 45 months, the timescale remains among the longest recorded since major reforms to HMRC's investigative structures.
The continued lengthiness of cases underscores both the scale of the challenge facing the tax authority and the complexity of the issues under consideration.
The slow pace of case resolution comes amid a period of change, as HMRC has recently raised its late payment interest rate to 7.75%, the highest since 2001. This measure, aimed at encouraging prompt tax compliance, adds further pressure on already scrutinised companies during long-running disputes.
Larger number of cases under scrutiny
The total number of ongoing large business investigations has grown from 2,031 to 2,149 in the past year.
This increase reflects both an expansion in HMRC’s enforcement capacity and an uptick in complex cases requiring extended attention. The Large Business Directorate now monitors approximately 2,000 of the UK’s largest firms, which collectively contribute about 40 per cent of the nation’s tax revenues.
With over 2,100 active cases, roughly half of the country’s largest companies are currently under some form of HMRC review. In many instances, businesses face multiple concurrent enquiries, each relating to different segments of their tax affairs.
Drivers behind extended investigations
HMRC’s drive to address the estimated £47 billion gap between owed and collected tax remains a primary factor behind heightened enforcement activity.
“The increase in open investigations is being driven both by HMRC’s efforts to tackle the tax gap and the time needed to deal with complex enquiries,” stated Jake Landman, partner and head of tax disputes at law firm Pinsent Masons.
Over the past 12 months, HMRC launched 1,879 new investigations into large enterprises, a 21 per cent rise compared with the year before. This translates to 327 more new cases, further stretching the capacity of tax officials and extending the average time required to reach conclusions.
Operational and financial impact on businesses
Tax investigations that extend for several years pose considerable challenges for the businesses involved. Prolonged scrutiny can result in significant administrative and financial burdens, particularly when market conditions are uncertain.
According to Landman, “having businesses’ tax affairs under investigation for three, four, or even five years runs counter to efforts to make the UK a more business-friendly environment. Lengthy investigations create additional burdens at a time when business confidence is already fragile.”
Many businesses also encounter increased compliance costs and disruption to operations as they respond to multiple or overlapping HMRC enquiries, compounding their difficulties during periods of economic volatility.
Complexity of large business tax disputes
Disputes between major businesses and HMRC are often intricate, involving questions about international transactions, transfer pricing, and the interpretation of evolving tax legislation. As a result, the need for thorough analysis and frequently changing guidance has contributed to the average length of investigations. Despite these challenges,
HMRC has managed to accelerate some processes, closing 1,761 cases over the last year, up from 1,617 in the previous period. This improvement has brought the average duration for closed cases down by four months in one year. An HMRC spokesperson commented:
“We’ve made strong progress in resolving large business enquiries more efficiently, reducing the average length of closed cases significantly.
These cases are often complex and international, but we will not compromise on securing the right tax just to close a case quickly.”
Final Summary
The average duration of HMRC’s tax investigations into large businesses remains close to three and a half years, with both the number and complexity of open cases on the rise.
This situation is driven by increased efforts to close the tax gap and enforce compliance, yet it raises concerns about the operational impact on major firms and the overall efficiency of the system.
While HMRC has achieved some reduction in case closure times, many investigations still extend beyond four years, prompting calls for additional resources and renewed scrutiny from policymakers.
As government reviews of tax enforcement continue, the findings underline the importance of robust tax governance among large corporates.
The situation also highlights the value of clear guidance and transparency for businesses navigating these challenges. For users interested in tracking compliance and investigation trends, the Pie app can offer insights into the evolving tax landscape.
